The UK’s economy has grown faster than expected in the second quarter of 2023, as Friday’s data also showed that the country may avoid a recession.
The Office for National Statistics (ONS) said that the GDP had grown by 0.2 per cent in the three months to June and that the economy grew by 0.5 per cent in June, a better-than-expected recovery from the -0.1 per cent in May.
Rishi Sunak said the announcement represented “good news”.
He added: “At the beginning of the year I made growing the economy one of my top priorities, and we are making progress. There’s still more work to do, but today’s figures show the plan is working.”
However, the new data has also knocked the prime minister’s pre-election promise to show economic growth - which was one of his five pledges.
Analysts said the impact of Bank of England rate rises would hit harder in the year’s second half, and Labour said there was nothing to celebrate in the latest data.
Labour has attacked the news as proof “growth in the economy is still on the floor”.
“Thirteen years of economic mismanagement under the Conservatives have left Britain worse off and trapped in a low growth, high tax cycle,” shadow chancellor Rachel Reeves said.
“Labour’s plan for the economy will boost growth, increase wages and bring down bills so working people are better off.”
Chancellor Jeremy Hunt had previously said he is comfortable with Britain being plunged into recession if it will help lower inflation.
He said he would support the Bank of England increasing interest rates higher, potentially towards 5.5 per cent, as it contends with high prices.
Inflation had fallen for three consecutive months before February. It had dropped from a peak of 11.1 per cent in October to 10.1 per cent in January before last month’s unexpected drop.
As part of the Spring Budget announcement, Mr Hunt said the economy was forecast to grow by 1.8 per cent in 2024 and 2.5 per cent in 2025, according to Office for Budget Responsibility forecasts.
But what is a recession and what have experts forecasted for the UK this year?
What is a recession?
A recession is defined as two successive quarters of decline in GDP. It is the common measurement of the size of a country’s economy.
In the UK, it is measured in sterling and is a calculation of the value of goods and services produced over a period of time.
But the measurement most people focus on is the percentage change – the growth of the country’s economy over a period of time, typically a quarter or a year. It has been used since the 1940s.
A recession happens when the GDP figures turn negative and the economy goes into decline.
If a recession carries on for a long time, or is particularly bad, it is known as a depression.
Will we see a recession this year?
The Bank of England now thinks there will not be a recession in the UK this year, having previously said otherwise.
There is set to be growth in the second quarter of this year, while economists previously said there would be a decline.
Mr Hunt warned in February that the UK was “not out of the woods yet”.
He said: “The fact the UK was the fastest-growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared. However, we are not out of the woods yet, particularly when it comes to inflation.”
When was the last recession?
The UK entered a recession in 2020 because of Covid lockdowns, and it lasted for six months.
The economy plunged by 20 per cent between April and June 2020, as businesses closed and people were ordered to stay at home. GDP had fallen by 2.2 per cent between January and March that year.
At the time, the ONS said: “This is the largest quarterly contraction in the UK economy since ONS quarterly records began in 1955, and reflects the ongoing public health restrictions and forms of voluntary social distancing that have been put in place in response to the coronavirus pandemic.”
The biggest recent recession to hit the UK was the crash of 2008. It was caused by rising energy prices and the collapse of the housing market. This recession lasted for five quarters and was the longest one on record since the Second World War. The downturn of 2008 was global and affected all the G7 countries.
